Sciarratta v. U.S. Bank Nat'l Ass'n

• Decision Date: 18 May 2016
• Docket Number: D069439
• Citation: 247 Cal.App.4th 552,202 Cal.Rptr.3d 219
• Court: California Court of Appeals Court of Appeals
• Parties: Monica SCIARRATTA, Plaintiff and Appellant, v. U.S. BANK NATIONAL ASSOCIATION, as trustee, etc., et al., Defendants and Respondents.

247 Cal.App.4th 552

202 Cal.Rptr.3d 219

Monica SCIARRATTA, Plaintiff and Appellant

v.U.S. BANK NATIONAL ASSOCIATION, as trustee, etc., et al., Defendants and Respondents.

D069439

Court of Appeal, Fourth District, Division 1, California.

Filed May 18, 2016

Stephen F. Lopez Esq. and Stephen F. Lopez, San Diego, for Plaintiff and Appellant.

Keesal, Young & Logan, David D. Piper, Michael T. West and Joshua B. Norton, Long Beach, for Defendants and Respondents.

NARES, J.

This is an action for wrongful foreclosure. The homeowner, Monica Sciarratta, alleges that as a result of a void assignment of her promissory note and deed of trust, the entity that conducted a nonjudicial foreclosure sale on her home had no interest in either the underlying debt or the subject property. In Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 199 Cal.Rptr.3d 66, 365 P.3d 845 (Yvanova ), the California Supreme Court held that in a case such as this—where a homeowner alleges a nonjudicial foreclosure sale was wrongful because of a void assignment—the homeowner has standing to sue for wrongful foreclosure. (Id. at pp. 942–943, 199 Cal.Rptr.3d 66, 365 P.3d 845.) However, Yvanova did not address “any of the substantive elements of the wrongful foreclosure tort” (id. at p. 924, 199 Cal.Rptr.3d 66, 365 P.3d 845 ), and in particular did not address “prejudice ... as an element of wrongful foreclosure.” (Id. at p. 929, fn. 4, 199 Cal.Rptr.3d 66, 365 P.3d 845,.)

This case presents the question of “prejudice” left open in Yvanova : Where a homeowner alleges foreclosure by one with no right to do so, do such allegations alone establish the requisite prejudice or harm necessary to state a cause of action for wrongful foreclosure? Or instead, to adequately plead prejudice, does the plaintiff-homeowner have to allege the wrongful foreclosure interfered with his or her ability to pay on the debt, or lead to a foreclosure that would not have otherwise occurred?

Although Yvanova did not address this precise issue, the policy considerations that drove the standing analysis in Yvanova compel a similar result here. As the Supreme Court stated in Yvanova, it would be an “ ‘odd result’ indeed” were a court to conclude a homeowner had no recourse where anyone, even a stranger to the debt, had declared a default and ordered a trustee's sale. (Yvanova, supra, 62 Cal.4th at p. 938, 199 Cal.Rptr.3d 66, 365 P.3d 845.)

Accordingly, we conclude that a homeowner who has been foreclosed on by one with no right to do so—by those facts alone—sustains prejudice or harm sufficient to constitute a cause of action for wrongful foreclosure. When a non-debtholder forecloses, a homeowner is harmed by losing her home to an entity with no legal right to take it. Therefore under those circumstances, the void assignment is the proximate cause of actual injury and all that is required to be alleged to satisfy the element of prejudice or harm in a wrongful foreclosure cause of action.

The opposite rule, urged by defendants in this case, would allow an entity to foreclose with impunity on homes that were worth less than the amount of the debt, even if there were no legal justification whatsoever for the foreclosure. The potential consequences of wrongfully evicting homeowners are too severe to allow such a result. (See Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 410, 186 Cal.Rptr.3d 625 (Miles ).)

On the issue of standing, the Supreme Court stated, “ ‘Banks are neither private attorneys general nor bounty hunters, armed with a roving commission to seek out defaulting homeowners and take away their homes in satisfaction of some other bank's deed of trust.’ ” (Yvanova, supra, 62 Cal.4th at p. 938, 199 Cal.Rptr.3d 66, 365 P.3d 845.) Yvanova's holding on standing would be undermined unless the same considerations applied in determining what prejudice must be alleged to constitute a wrongful foreclosure cause of action. (Ibid. ) Therefore, we reverse the judgment of dismissal entered after the trial court erroneously sustained a demurrer to Sciarratta's first amended complaint without leave to amend, and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

In reciting the facts on review of a demurrer, “ ‘we accept as true the well-pleaded facts in [Sciarratta's first amended] complaint.’ ” (Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 571, 173 Cal.Rptr.3d 752, 327 P.3d 850.) “We may also consider matters that have been judicially noticed.” (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42, 105 Cal.Rptr.3d 181, 224 P.3d 920.)

Because the facts in this case are convoluted, it is helpful to know before one starts where one will end. As explained in detail post, Deutsche Bank was the owner of Sciarratta's loan and beneficiary of the deed of trust according to the public record at the time of this foreclosure. But Deutsche Bank did not foreclose. Bank of America did.¹

A. Washington Mutual Loan and Deed of Trust

In June 2005 Sciarratta obtained a $620,000 loan secured by real property in Riverside County, California (the property). She executed a promissory note secured by a deed of trust identifying the lender as Washington Mutual Bank, F.A. (WaMu) and the trustee as California Reconveyance Company (CRC).² In January 2008 WaMu substituted Quality Loan Service Corporation as successor trustee.

B. The Assignment to Deutsche Bank

On April 24, 2009, JPMorgan Chase Bank, N.A. (Chase), as successor in interest to WaMu, assigned the Sciarratta deed of trust and promissory notes to Deutsche Bank National Trust Company, as trustee for Long Beach Mortgage Loan Trust 2006–6 (Deutsche Bank). This assignment was recorded on April 27, 2009, as document No. 2009–0205476.³ Chase, acting on behalf of Deutsche Bank, also substituted CRC as trustee.

C. Sciarratta's Default and Notice of Sale

By April 24, 2009, Sciarratta's loan was $15,362.99 in arrears. On April 27, 2009, CRC recorded a “Notice of Default and Election to Sell Under Deed of Trust” (Notice of Default). The Notice of Default stated in part: “To find out the amount you must pay, or to arrange for payment to stop the foreclosure ... contact: JPMorgan Chase Bank ... at [address], [telephone number].”

In July 2009 CRC recorded a “Notice of Trustee's Sale,” stating the property would be sold at auction on August 18, 2009 and that the estimated unpaid balance and other charges was $729,234.93.

D. Purported Assignment to Bank of America

On November 9, 2009, Chase, as successor in interest to WaMu, recorded a document entitled “Assignment of Deed of Trust,” purporting to assign the Sciarratta deed of trust and promissory notes to Bank of America, National Association, as successor by merger to LaSalle Bank NA as trustee for WaMu Mortgage Pass–Through Certificates Series 2005–AR19 (Bank of America).⁴

E. Trustee's Sale to Bank of America

On the same day, November 9, 2009, CRC recorded a “Trustee's Deed upon Sale” on behalf of Bank of America as “the foreclosing beneficiary” of the deed of trust. Bank of America acquired the property in exchange for a credit bid.

F. “Corrective” Assignment to Bank of America

On December 28, 2009, Chase, as successor in interest to WaMu, recorded a document entitled “Assignment of Deed of Trust” which states: “This assignment is being recorded to correct the assignee reflected on the assignment recorded April 27, 2009 as instrument No. 2009–0205476. [¶] For value received, the undersigned hereby grants, assigns, and transfers to Bank of America ... all beneficial interest under that certain Deed of Trust dated 06/17/2005, executed by Monica Sciarratta....”

G. Sciarratta's District Court Action

On November 2, 2009—the day before the scheduled trustee's sale—Sciarratta filed a 16–count complaint against Chase, Deutsche Bank, and CRC in United States District Court. The complaint states in part, “This is an action to quiet title against parties who have wrongfully foreclosed upon residential real property of the Plaintiff, but who in reality have no standing whatsoever to exercise any rights under the subject deed of trust that encumbers Plaintiff's realty.”

The record provided by the parties does not inform us about any other aspects of this litigation except that in May 2012 the district court entered a judgment of dismissal with prejudice in favor of the defendants.

H. Sciarratta's State Court Action

In February 2013 Sciarratta filed a state court complaint for (1) wrongful foreclosure, (2) quiet title, and (3) cancellation of instruments against U.S. Bank National Association as trustee successor in interest to Bank of America, Deutsche Bank, and CRC (collectively, Defendants).

Sciarratta's complaint alleges the foreclosure “is wrongful in that the trustee that held the sale was not the proper trustee at the time of the sale and therefore the sale of the Subject Property is void as a matter of law ... or in the alternative the party that held the sale and acquired the Subject Property by way of a supposed credit bid was not the holder of the Subject Note and was not the beneficiary of the Subject Deed of Trust and could not have submitted a credit bid.” Sciarratta's original complaint did not allege particularized prejudice from the fact that Bank of America rather than Deutsche Bank foreclosed.

Defendants demurred to the complaint on the grounds (1) the action was barred by the res judicata effect of the district court judgment of dismissal in Sciarratta's previous action, and (2) Sciarratta had not alleged the essential element of prejudice. The court overruled this demurrer.

After certain defaults were set aside that are not relevant to any issues in this appeal, Defendants answered the complaint, and later Sciarratta dismissed Deutsche Bank without prejudice.

I. Motion for Judgment on the Pleadings

In May 2014 Defendants filed a motion for judgment on the pleadings, primarily asserting that...